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Nuclear vs. IGCC

Next-gen technologies race to dominate the big build.

Fortnightly Magazine - July 2007

The difference on a $3 [billion] or $4 billion loan translates into $20/MWh in production costs. It’s a big number.”

Weighing Costs

On a pure economic basis, both nuclear and IGCC plants are difficult to justify. No company today is developing either type of plant without significant public-policy support. Sponsors of nuclear projects are counting on federal lawmakers to deliver incentives promised by the Energy Policy Act, and IGCC projects rely on a portfolio of federal, state, and even local incentives ( see sidebar “Funding IGCC” ).

“Where utility commissions are looking hard at gasification, they are looking a little beyond the initial cost of electricity,” Amick says. “They are looking at the cost of carbon capture in later years, and trying to put together a path that considers the environmental good of the investment as well as the cost of electricity.”

The same could be said of nuclear plants, but none have gone far enough in the development process to become part of a rate case. Some IGCC proposals have come before state utility commissions, and a few are getting a warm reception on Wall Street. “IGCC had a good three- or four-year head start on nuclear,” says Caren Byrd, executive director with Morgan Stanely. While no IGCC projects have yet been financed, several are assembling a strong package of incentives and rate support.

“For IGCC projects to get built, everyone has to feel a stake in the solution,” Spitzley says. “The vendors must provide some degree of wrap, and the off-taker must bear some early-stage scheduling and performance risk.”

In this respect, IGCC has come a long way in the last couple of years, with multiple equipment vendors—Siemens, Mitsubishi, and GE Energy—offering standardized plant designs, equipment warranties, and operational support.

“We created our relationship with Bechtel and developed a standard 60-Hz IGCC product so we could get as comfortable with the technology as possible,” Suciu says. “That allowed us to guarantee the performance, the schedule and as much of the cost as possible.”

The costs of IGCC+CCS versus new nuclear plants, however, are somewhat difficult to compare, because of major uncertainties about nuclear licensing, permitting, construction, waste-management, and capital costs. Uncertainties about IGCC+CCS are significant, but they relate mostly to operating costs. Performance data for commercial-scale IGCC plants are relatively scanty, and no one knows for sure what long-term carbon sequestering will cost. Capital costs, on the other hand, are relatively well understood for IGCC and carbon-capture technology.

“IGCC projects are at the whim of commodity pricing, but it’s the normal world of construction risks,” Amick says. “It’s not like the nuclear world, where everything you do might have to be redone to satisfy changes in law at very detailed levels.”

Indeed, actual costs for nuclear power plants have proved to be notoriously unpredictable. But as sponsors of all types of construction projects have learned, prices for labor, materials and equipment have skyrocketed in recent years and likely will continue rising in the coming decade ( see sidebar “Return to Cost-Plus” ). In short, all cost estimates for either nuclear